Plummeting pound is pushing up material costs

Brian Berry, chief executive of the FMB
Brian Berry, chief executive of the FMB
Brian Berry, chief executive of the FMB
Brian Berry, chief executive of the FMB

The Federation of Master Builders (FMB) State of Trade Survey results for Q2 2016, show that two-thirds of construction small and medium enterprise (SME) bosses predict material price inflation.

Brian Berry, chief executive of the FMB, said: “Following the EU referendum, the plummeting value of sterling has further complicated an already difficult situation for small construction firms. Even prior to the referendum result, nearly two in three bosses were anticipating rising material costs, on which there has been intense pressure over the past couple of years, as demand for projects has picked up again.

“With the dramatic fall in currency value, however, we’re concerned that the trend towards price inflation will gather pace. We’ve already heard accounts of timber and brick costs rising, and a number of sources have said that even steel prices have risen by eight per cent since the decision was made to leave the EU.”

Brian continued: “Combined with the continuing skills shortages shown in our survey results, which puts upwards pressure on salaries and wages, the costs associated with running a small construction firm are on the rise. Too many are already operating on razor-thin margins and are forced to tender at prices which barely return a profit in order to remain competitive. This leaves little capacity to absorb dramatic price increases.

“The results show that firms were already pencilling in escalating costs for the coming months, but few will have anticipated a nine per cent drop against the Euro and 12% against the American Dollar. The UK construction industry is heavily reliant on imported products and materials so this situation is very concerning indeed.”

Brian concluded: “It’s important to note that this survey was conducted prior to the referendum and shows that SMEs were consolidating their recovery, with demand in the private sector continuing to pick up. If this wavers, as suggested by recent stats showing that the construction sector is now in recession, then the Government must do everything in its power to reverse this situation and get Britain building again.”